When you start a new company, you probably have a good idea of where you want it to go. However, neither business nor life moves in a straight line. Despite our best intentions, there are many ups, downs, detours, and even dangerous cliffs.
As a result, you’ll have to manage a lot of transitions as a business owner. No matter what’s changing, keeping your business finances in order will be key to success.
What kinds of business transitions can you expect to navigate? How do you manage your business finances as things change? Here’s what you need to know.
Types of Business Transitions
When someone says “business transition,” they’re often referring to a change in business ownership. That’s certainly the most dramatic type of change you can face. Perhaps you’ve decided it’s time to sell the business and move on.
If so, you’ll have a lot of financial plans to make. You’ll have to create reports showing the company’s economic history, spruce up your business plan, and distance yourself from daily operations. At the same time, you must evaluate buyers and choose the right candidate.
However, that’s far from the only business change you’ll see. Perhaps the company isn’t operating very efficiently, and you need to reorganize your staff. This type of change causes a lot of stress for everyone involved, especially since some people are let go or moved into new positions.
If you’re moving through a reorganization, make sure you carefully align HR strategy with your long-term business goals. The HR department should be closely involved in your growth strategies so that they can hire and place people appropriately.
A third common business transition is a change of direction. The COVID-19 pandemic put many business owners in a position where they had to change how they did business dramatically. Perhaps an in-person store moved online, or maybe a restaurant had to alter its offerings significantly.
Being prepared for a change in direction is essential, and often having the right education makes all the difference. Going back to school can help you learn about the latest best practices so you can land on your feet in any crisis.
Evaluate Your Current Position as a First Step
If you find yourself facing a major business transition, the first step is to evaluate where your company currently stands. What cash do you have on hand? What’s your current income, and how does it compare to your liabilities?
You may want to check both your business and personal credit. If there are any errors or negative actions, take steps to remove them. You can file disputes or contact creditors directly to make updates to your report.
Once you’ve reviewed your financial statements and are aware of where you stand, think about what changes need to be made so you stay competitive and profitable. A clear understanding will help you decide what transition to make and how to share the news with your staff and stakeholders.
Improve Your Company’s Value
No matter what’s happening, the ultimate goal of any change is to improve your company’s value. Whether you’re selecting a new owner, transitioning to a new model, or reorganizing your staff, you want to come out more efficient and effective on the other side.
Look at which obstacles you can remove in your current business processes. There are almost always bottlenecks that may cause headaches for employees and customers. If you’re making a significant change anyway, this is a great time to remove those stumbling blocks.
Next, think about what new offers your company can provide to customers. Are there products or services that dovetail nicely with your current inventory? Selling complementary products and services is a great way to encourage repeat buying, which improves your bottom line without significant marketing costs.
Finally, think about any future funding needs you have. What can you do to put your business in a strong position to qualify for future loans or investment opportunities? This is the time to dream big about your future direction and prepare yourself for success.
Don’t Let Details Fall Through the Cracks
Whenever there’s a big change in your company, it can be easy to get so focused on the significant updates that you forget about common, day-to-day financial issues. Appoint someone — an employee or outside firm — to keep an eye on the details and hold you accountable.
For instance, you’ll need to stay on top of your company tax obligations, filing and reporting requirements, and employee benefits. It’s no fun to be reorganizing your company only to realize that an oversight caused your unemployment insurance to lapse!
Also, keep your accounting records and reporting up to date. Not only does this help you navigate your financial needs during a transition, but it also enables you to evaluate the before and after pictures so you can determine if your changes were effective.
Transitions can involve a lot of stress and extra responsibilities, so ensure you have help to keep the little things on track.
Transitions Happen — Are You Ready?
The only thing constant about business is that nothing is constant. By taking steps to evaluate and prepare for major changes, you’ll be setting yourself up for success.
Managing your business finances during a significant shift isn’t easy, but with these tips, you’ll be able to land on your feet.